What changed in South-east Asia's data centre boom?
Thailand paused construction on 49 data centre projects and put decisions on 117 more on hold in September 2026. The Nation Thailand reported the freeze on 4 September, after a meeting of the national committee responsible for data centre policy. The two groups together cover 166 projects. A further 35 projects were already operating and were not part of the pause.
The pause is temporary on paper. Agencies were given a month to draft minimum environmental and social standards. Officials described the goal as a single national framework, replacing approvals scattered across ministries.
The order applied to projects already under construction as well as applications still in the queue. It did not shut the 35 operating sites, which continue to run while the standards are written.
Indonesia acted at the end of the same month. West Java governor Dedi Mulyadi ordered Singapore's BDx Data Centers to stop work at Jatiluhur. The company had broken ground on a 640-megawatt AI campus there on 22 September, and Reuters reported the order on 30 September. BDx runs data centres for cloud providers and other large businesses across Asia.
"The project is being halted not because it violates environmental rules," Dedi said. "It's being halted because the permits have not yet been issued."
Malaysia's Johor state took a different route. It stopped approving Tier 1 and Tier 2 data centres. Those older designs can draw up to 50 million litres of water a day, according to the New Straits Times. The Guardian noted that this volume is roughly the daily drinking water needs of 25 million people.
The Guardian brought the three decisions together on 7 November, describing a regional arms race that had hit a pause. The common constraint is not demand for AI. It is the power, water and permitting needed to turn that demand into working servers.
Why is South-east Asia central to the AI build-out?
South-east Asia matters because it holds an outsized share of what is being built. Cushman & Wakefield's Asia Pacific update for the first half of 2026 put the development pipeline at a record 26.5 gigawatts. That includes 4.8GW under construction and 21.7GW planned, after 7.1GW was added in six months.
South-east Asia accounts for about half of the under-construction total across Asia Pacific, the property firm said. Malaysia leads with 1,039MW under construction, followed by Thailand at 859MW. Bangkok's under-construction capacity rose 148% in the half year, and Johor's nearly doubled to 602MW.
Johor is the clearest example of the shift. Operational capacity in the state rose from 94MW in 2023 to 1,110MW in 2026, the Guardian reported. Another 3,088MW is under construction or planned. Cushman & Wakefield ranks Johor first in Asia Pacific by combined operational and future capacity, above 4GW. Wood Mackenzie notes that Johor's data centre load more than doubled between 2024 and 2025. Proximity to Singapore, competitive operating costs and favourable policies supported the growth.
The money followed. Wood Mackenzie puts cumulative investment in Johor at MYR165 billion, about US$42 billion. Microsoft announced $2.2 billion for cloud and AI infrastructure in Malaysia in 2024. AirTrunk plans $3 billion to double its Johor sites from two to four.
Other markets are trying to replicate the model. Indonesia has a 1,699MW pipeline around Jakarta, and Microsoft is building five data centres under a $1.7 billion plan. Thailand's board of investment had approved projects from TikTok, UAE-based Skyline and Singapore's Bridge with planned investment of $27 billion.
Singapore's limits explain much of this. The city-state paused new data centres from 2019 to 2022 because they were intensive users of water and electricity. It added only 95MW of operational capacity between 2023 and 2026, so developers looked to Johor, Batam and greater Jakarta instead.
"The challenge increasingly lies in securing the power infrastructure needed to support the next generation of AI workloads," said Andrew Green. He heads Cushman & Wakefield's data centre group in Asia Pacific. He said expansion was shifting toward markets that can supply power at scale. Pritesh Swamy leads research for Cushman & Wakefield's data centre group. He said operators are "placing greater emphasis on resource efficiency and long-term sustainability".
The firm tracks 30 markets across Asia Pacific and revised its maturity index upwards in the first half of 2026. That revision reflects how quickly development pipelines and operational capacity have scaled.
How much power and water do these campuses need?
The numbers behind Johor's success also explain why regulators are hesitating. Wood Mackenzie estimates that data centre maximum demand in the state has reached about 3.8GW. That is nearly one and a half times Johor's current electricity demand. The state also accounts for an estimated 51% of data centre maximum demand across Peninsular Malaysia. Concentration is a global pattern. The IEA notes that nearly half of US data centre capacity sits in five regional clusters.
Data centres are expected to use around 40% of Johor's end-user electricity by 2035, up from about 24% today. Generation is not the immediate problem. Johor has about 6.8GW of installed capacity against demand of about 2.6GW, and transmission utilisation is around 30%.
The bottleneck is local. Demand is concentrated around Sedenak Tech Park and Nusajaya Tech Park, where grid connection points are scarce. Wood Mackenzie flags shortages of 132 kilovolt main intake substations and limited injection points for renewable power.
Johor's growth "has the potential to create localized grid connection bottlenecks", said Alvin Tan of Wood Mackenzie. He said it would also raise the need for transmission upgrades and new supply capacity.
Water is the second constraint. Johor is prone to droughts. Its older Tier 1 and Tier 2 designs can consume up to 50 million litres a day. In Indonesia, research firm Tenggara Strategics found that many facilities are water-cooled. Sitting in hot, humid lowlands raises their consumption compared with cooler sites.
Thailand's Eastern Economic Corridor faces similar pressure. Somnuck Jongmeewasin of the advocacy group EEC Watch said the Khlong Luang reservoir in Chonburi is a flashpoint. "Despite the reservoir being shallow and under strain, authorities are piping its water to industrial estates," he said.
The global picture is larger but less local. UN University researchers estimated that data centres used 448 terawatt-hours of electricity in 2025. They project 945TWh by 2030, about twice France's 2025 consumption. The associated water footprint equals the basic annual domestic needs of 1.3 billion people in sub-Saharan Africa.
The International Energy Agency put data centre consumption at 415TWh in 2024, about 1.5% of the world total. It also expects roughly 945TWh by 2030. The IEA notes that a typical AI-focused facility draws as much power as 100,000 households. The largest under construction will use 20 times more.
Grid timelines turn those figures into a scheduling problem. New transmission lines take four to eight years in advanced economies, the IEA found. Wait times for transformers and cables have doubled in three years.
The agency also expects data centres to account for around one-tenth of global electricity demand growth to 2030. In advanced economies, where demand had been flat for decades, the share is more than 20%.
What are Thailand, Malaysia and Indonesia doing about it?
Thailand's response has been the most explicit. The September meeting collected data from 16 agencies, found 35 operating projects and ordered the pause on the rest. It also told the Department of Business Development to create a dedicated data centre business category.
Officials rejected a proposed 2MW threshold for treating a data centre as an industrial operation, saying it was too small. Four subcommittees will set requirements for infrastructure, sites and buildings. A one-stop approval process is meant to replace agency-by-agency reviews.
Water and electricity rates are to reflect actual and indirect costs. The framework also sets minimum environmental and social standards. Drafting is expected within a month.
Thailand's energy minister, Akanat Promphan, has proposed a separate electricity user category with higher tariffs. He argued that the power would come largely from expensive imported gas.
The meeting also instructed officials to compile water and electricity requests held by different agencies. These include applications tracked by the broadcasting and telecoms regulator.
Malaysia tightened the terms instead. A national data centre taskforce reviews projects for energy and water security. Johor's refusal to approve Tier 1 and Tier 2 designs leaves higher-tier facilities as the route to approval.
Singapore still approves projects selectively. New capacity is tied to power efficiency and carbon emissions. That selectivity helps explain why only 95MW was added in four years, despite sustained demand from cloud providers.
Indonesia is testing the permit route instead. Dedi said he supported investment in West Java if projects were environmentally sound. He linked his concern to water shortages associated with some data centres. Work can resume once permits and the environmental assessment are complete.
Who benefits from the build-out, and who carries the cost?
The investment case is easy to state and harder to audit. Construction brings work. But Tan-Soo said data centres generally generate fewer long-term jobs than other industries. Those industries may use comparable land, electricity and water. He is an assistant professor at Singapore's Lee Kuan Yew School of Public Policy. He said communities may reasonably ask whether they receive a proportionate share of the benefits.
Local politics has already shifted. In February, Johor saw its first public protest against a data centre. Demonstrators picketed a ZData Technologies project over dust and water supply. Similar objections have surfaced around Thailand's Eastern Economic Corridor.
Operators say they are reducing their footprint. Bridge built a water reclamation plant and pipe network in Johor for an upcoming campus. AirTrunk agreed in April to recycle wastewater with Johor Special Water. AirTrunk said its "campuses are designed to operate significantly more efficiently than conventional datacentres".
AirTrunk did not respond to detailed questions about its efficiency data, the Guardian reported.
Efficiency claims are hard to compare across companies. The Guardian reported that Microsoft's published Power Usage Effectiveness data shows its Asia-Pacific facilities as the least efficient in its global estate. Microsoft has said it is looking at South-east Asian clean energy projects to fuel its sites.
That gap matters because Johor's installed generation is mainly gas and coal, according to Wood Mackenzie. Thailand's tariff proposal would make operators pay more of the cost of the gas-fired power they need. The Guardian reported that the energy minister described the fuel as expensive and imported.
Tan-Soo argues that national frameworks should make operators face the full social opportunity cost of the resources they consume. That would treat water, land and grid capacity as scarce inputs rather than free ones.
"South-east Asia is increasingly aware but only partially prepared," Tan-Soo said. He argued that preparedness for environmental impacts needs to keep pace with the speed of investment.
What should you watch next?
The first test is Thailand's standards. The pause was meant to last until agencies agreed minimum environmental and social requirements, with drafting expected within a month. Whether those rules become a permanent gate or a short delay will shape how quickly approved projects restart. The meeting also set up a system of post-opening audits, so the rules would outlive the initial pause if adopted.
The second is Johor's grid. Wood Mackenzie points to substations and connection points rather than fuel as the immediate limit. The pace of transmission and distribution work will decide which campuses can energise. Water rules will decide which designs get built at all.
The third is substitution. Vietnam's Ho Chi Minh City pipeline reached 68MW in the first half of 2026, more than double its operational capacity. That growth was helped by a US$1 billion framework agreement involving G42, FPT and Viet Thai Group. Batam and Manila are also expanding.
The fourth is whether the pause spreads. Reuters reported that governments worldwide have moved to freeze, restrict or ban new data centre construction. The stated reasons include electricity costs, water stress and land use. A regional precedent in South-east Asia would carry weight beyond the three countries involved.
For investors, the signal is that approvals no longer follow demand alone. A site can have a customer and land title and still lack a grid connection or water allocation.
Some caution is needed with the totals. Pipeline megawatts, operational megawatts and maximum demand are measured differently. Not every paused project is cancelled. Thailand's 49 sites could restart under new rules, and Indonesia's BDx campus could resume once permits are issued.
What is clear is that the binding constraint has moved. For three years the question in South-east Asia was where to find land and customers. It is now whether the grid, the water supply and the permit system can keep pace with the capital.
- •Whether Thailand publishes its minimum standards within the one-month target.
- •How quickly Johor clears 132 kilovolt substation and connection bottlenecks.
- •Whether Vietnam, Batam or Manila absorb projects that stall elsewhere.